360° Coverage : Yuan Edges Lower As Euro Worries Mount

2 Updates
Yuan Edges Lower As Euro Worries Mount
Photo Credit: Forbes Business

Yuan Edges Lower As Euro Worries Mount

Feb 25 2014, 9:03am CST | by

Apparently, Wall Street prefers sunshine to storm clouds. While ignoring the run of weak U.S. data due to the bad weather, the Street is only too happy to focus on M&A activity across the...

Filed under: news

 
 
 

29 weeks ago

Yuan Edges Lower As Euro Worries Mount

Feb 25 2014, 9:03am CST | by

Apparently, Wall Street prefers sunshine to storm clouds. While ignoring the run of weak U.S. data due to the bad weather, the Street is only too happy to focus on M&A activity across the developed stratosphere, choosing to believe that all is well in capital markets. This week’s sharp turn higher in investors risk appetite is helping the likes of commodity prices to once again find firmer footing. This sector is beginning to bounce back nicely from last week’s China-related concerns. Both the AUD and CAD, commodity and interest rate sensitive currencies have been helped by the fact that USD/CNY has declined with a little help from Chinese monetary authorities rather than investor positions.

Again, the major currencies remain rather stable and still show little sign that they want to break out of their contained ranges. The 18-member single currency has tried to rally following the better-than-expected German Ifo report yesterday, however, heightened speculation that Mario Draghi, President of the European Central Bank (ECB), may be considering more easing action at next week’s ECB meeting is discouraging any breakout higher by the euro. Technically, the currency continues to run into a plethora of sellers residing north of €1.3775. It’s been forced lower, not on fundamentals, but on the back of Ukraine’s current fallout situation where eager buyers prefer to flip their positions ahead of the psychological €1.37 handle.

ECB Action Hotly Anticipated

The difference in global investor moods is currently bipolar in attitude. Stateside investors remain remarkably optimistic and resilient in their opinions. The majority expects the U.S. economy to come through this weather-related malaise in stride. So much so that the ongoing emerging market issues are not weighing down any developed nation investors’ risk appetite like it has done in recent months.

It seems that the shift in investors’ individual moods and central bank expectations have resulted in most currency pairs being whipped about intraday in a very trendless fashion. The foreign exchange (forex) market appears content to trade within the confines of these ranges.

As the week progresses, everyone is beginning to become more concerned with what Draghi and the ECB will do. The fact that the Eurozone is flirting with deflation may force the ECB to act sooner rather than later. What about next week? Over the medium-term, many see downside risks to both growth and inflation in the region, unlike the ECB’s more balanced view. A lack of further policy action may undermine Draghi and his team’s credibility to tether longer-term inflation more closely to +2%. The lack of sound policy initiatives being implemented, or worse still, the ability to lose the faith of the trading public, has the potential to put the EUR in much deeper water. This market has been short the single currency for a very long time and it has more to do with the mighty dollar’s lackluster performance rather than the EUR’s flight that is undermining potential winning positions.

Chinese Central Bank Keeps Yuan Down

Looking at most of the majors’ trading patterns, there is perhaps one willing to forgo the natural trading path to true value, and that is the Chinese renminbi, or yuan. A battle rages between policymakers at the People’s Bank of China (PBoC): there are those who believe that the currency is close to its fair value and others who obviously disagree. Current, sometimes wild domestic interpretation of fundamentals (when the developed world requires stronger fundamentals China conveniently delivers) supports those who expect further currency appreciation over the medium term. The ever-present PBoC will surely create some volatility along the way. A train of thought believes that the CNY will break through that psychological CNY6.00 handle sometime this year. Investors are heavily positioned that way. But it will not happen if Chinese policymakers have their way.

In overnight trading, the yuan fell to a six-month low outright (CNY6.1310). The PBoC’s continued effort to push the currency lower is finally paying off – causing a short squeeze in the onshore market. The CNY has depreciated -1.5% from its record high versus the USD set last month and has fallen -1.2% year-to-date after appreciating +2.9% last year. Offshore investors can expect the PBoC to continue intervening and weakening the CNY further or at least until they have convinced the “offshore” investors to change their bullish views. Ongoing moves like this will require Chinese trading authorities to widen the trading range.

It’s rather difficult to get overly excited over any other asset class. Money remains cheap; stocks are performing as they should, albeit above valuations. But looking at the various other asset classes, the lack of volatility does not warrant investors to change their trading strategies wholeheartedly just yet. U.S. Treasurys seem to have been stranded for months. Their yields spiked nearly a year ago, last May, when ‘tapering’ was first suggested. Ever since, U.S. 10′s have been wrapped between +2.5% and that psychological +3% level, and through the ongoing emerging market fallout. This ideal scenario is not sustainable especially now that the U.S. economy seems to be on the road to recovery, with or without inclement weather. Before long, Janet Yellen, Chair of the Federal Reserve, will be touting other policy guidance issues, well removed from the “tapering debate”, and that should get U.S. longer-term yields finally moving higher again.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Source: Forbes Business

 
Update
2

2 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workfor ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

2 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Medical irregularities found in Joan Rivers' death: Report
Los Angeles, Sep 17 (IANS/EFE) The personal doctor of Joan Rivers is being investigated for the death of the popular American comedian and television host who died a week after undergoing a minor throat operation.
 
 
Ukraine unveils roadmap to implement EU deal
Kiev, Sep 17 (IANS) The Ukrainian government has approved a plan to implement the Association Agreement with the European Union (EU), Ukrainian Prime Minister Arseny Yatsenyuk said Wednesday.
 
 
Shun pills, try sex to get relief from migraine
London, Sep 17 (IANS) Got a throbbing or pulsing sensation in one area of the head? Forget pills and go between the sheets to relieve migraine symptoms.
 
 
Can another drink relieve you from a hangover?
London, Sep 17 (IANS) Is "hair of the dog" the best cure for hangover? According to a renowned author and journalist, another drink is the way to get rid of those forgetful morning episodes of a dry mouth, headaches, nausea and lethargy.
 
 
 

Latest from the Network

ICC World Cup trophy arrives in Pakistan
Dubai, Sep 17 (IANS) The ICC World Cup trophy arrived in Lahore as part of its visit to countries which will compete in next year's extravaganza to be staged in Australia and New Zealand from Feb 14 to Mar 29....
Read more on Sport Balla
 
Sino-Indian cooperation invaluable: Chinese daily
Beijing, Sep 17 (IANS) The India-China relationship is of enormous strategic value, one that cannot be replaced by other bilateral ties, a leading English daily of China said ahead of Chinese President Xi Jinping's...
Read more on Politics Balla
 
Shun pills, try sex to get relief from migraine
London, Sep 17 (IANS) Got a throbbing or pulsing sensation in one area of the head? Forget pills and go between the sheets to relieve migraine symptoms. In a recent survey by German researchers, 60 percent of those...
Read more on Apple Balla
 
Asian Games: India bank on Saina, Sindhu for medals (Preview)
Incheon, Sep 17 (IANS) Once again the onus of winning medals will fall upon the young shoulders of Saina Nehwal and P.V. Sindhu, who are India's best bets in the badminton competition that gets underway at the 17th...
Read more on Sport Balla
 
Scottish referendum: Three polls show slight lead for 'No'
Edinburgh, Sep 17 (IANS/EFE) Three new opinion polls published Wednesday have shown a slight lead for the "no" vote on Scottish independence. Meanwhile, politicians from both sides made last minute appeals before...
Read more on Politics Balla
 
Athletic Club relishing Champions League return
Madrid, Sep 17 (IANS) The Champions League football group stage returns to Bilbao for the first time since 1998 when Athletic Club Bilbao entertain Shakhtar Donetsk in the San Mames Stadium Wednesday night. Athletic...
Read more on Sport Balla
 
Against Manchester City, Bayern rests hopes on Alonso
Berlin, Sep 17 (IANS) It was a picture of rare symbolic power: Inevitably, Bayern Munich is resting its hopes on one man's shoulders in the Champions League opener against Manchester City Wednesday night - Xabi Alonso...
Read more on Sport Balla
 
62 detained in China in social networking porn crackdown
Beijing, Sep 17 (IANS) Police in Beijing and Guangzhou have detained 62 suspects for using social networking services to organise prostitution or spread pornographic content, according to China's anti-pornography...
Read more on Politics Balla
 
Gary Kirsten launches travel &amp; tourism company
Durban, Sep 17 (IANS) Former South Africa and India coach Gary Kirsten has launched a travel and tourism company in collaboration with Cape Africa Tours. The company named "Gary Kirsten Travel &amp; Tours" is...
Read more on Sport Balla
 
Jamaat calls Bangladesh shutdown for release of leader
Dhaka, Sep 17 (IANS) Bangladesh's Jamaat-e-Islami party has called for a country-wide shutdown to press its demand for release of its top leader, Delwar Sayedee, whose death sentence was commuted by the Supreme Court...
Read more on Politics Balla